Kylie Davis: (00:04)
Hello everyone. Welcome, my name is Kylie Davis and I’m founder and executive director of the Proptech Association of Australia. And I’d like to welcome everyone here to our fourth Proptech panel, on the disruptors changing property ownership. Now, the aim of the Proptech Association, which started in February this year is to champion the real estate technology industry, and to lead the proptech conversation. And we want to do this by helping real estate agents and the property industry feel more confident about adopting and investing in innovation and build a community of bold thinking innovators to share their knowledge.
Kylie Davis: (00:43)
So if you’d like to help us do that, follow the Proptech Association on LinkedIn, go to our website, proptechassociation.com.au, and sign up to receive our newsletter or join us straightaway, which is currently free till the end of the calendar year. Now I’d like to thank our sponsors who have made this possible, the Real Estate Institute of WA, our new sponsor, but especially Stone & Chalk, who are the sponsors of our event today. And for those of you who don’t know Stone & Chalk, Stone & Chalk was founded as a not-for-profit in Sydney in 2015 to help fintech startups commercialise and grow. And from 40 startups in 2015, it now has 200 startups in Sydney, Melbourne, and Adelaide, covering all areas of emerging technology, including agtech, medtech, cybersecurity, defence space, and of course property technology. And currently there are around 20 proptechs that [inaudible 00:01:36] Stone & Chalk own. So without further ado, I’d like to hand over to our host for today’s panel, Jennifer Harrison. Over to you Jen.
Jennifer Harrison: (01:46)
Thank you very much Kylie. Hello, I’m Jennifer Harrison. I’m vice president of the Proptech Association Australia. And I’m also very proud to be a mentor at Stone & Chalk in Sydney, and I’m in the studio at Stone & Chalk in Sydney right now. We know that Aussies love property. We’re in love with the dream of owning that quarter acre block in the suburbs, or maybe a modern townhouse in the inner city. We also know however that property is expensive, especially in our major cities. In Sydney, the median house price is now North of $1 million, and there are plenty of suburbs in Sydney or a million dollars will barely buy you a one bedroom unit. So affordability or lack of affordability has become a major theme in the Australian housing market. It poses problems for both owner occupiers and investors.
Jennifer Harrison: (02:45)
It contributes to social inequality, by preventing first time buyers from getting onto those first rungs of the property ladder. It also is a problem for investors who face concentration risk inside their portfolios and might find they’re looking at very, very low current market yields. So it’s my pleasure today to have on the panel three passionate proptechers, who are tackling the problem of affordability head-on, by facilitating alternative methods of ownership, like fragmentation and co-ownership. So let’s say hello to each of them now. First of all, joining us from Melbourne is Ewan Laughlin from BrickX. Hello Ewan, how are you today?
Ewan Laughlin: (03:30)
Hi Jennifer. I’m well, thank you.
Jennifer Harrison: (03:33)
Awesome. Joining us from Perth is Daisy Ashworth, who is co-founder of Mortgage Mates. Hi Daisy.
Daisy Ashworth: (03:41)
Hi Jennifer. Thank you for having me today.
Jennifer Harrison: (03:43)
Pleasure. And last on the panel, but not least is Darren Younger who’s joining us from Sydney, and Darren is the founder and CEO of Bricklet. Hello Darren.
Darren Younger: (03:53)
Jennifer Harrison: (03:56)
Okay. Now let’s get into a bit more of a deep dive with each of our panellists. And if you do want to ask questions, you can use the online facility for that. Ewan, let’s start with you and BrickX. BrickX is short for Brick Exchange and you went live to the Australian public in late 2016, but what kind of Bricks can I buy on the Brick Exchange? How does it work?
Ewan Laughlin: (04:22)
Sure. Thanks Jennifer, and good afternoon everyone. Thanks to Stone and Chalk and Proptech Association for inviting me as a panellist. Thank you to the attendees as well, for joining us this afternoon and the member panellists. Obviously anything I say today is general advice only, and I would recommend that viewers that if they would require further detail, to refer to the PDS for more details. In terms of BrickX itself, as you articulated in your opening remarks Jennifer, it commenced in 2016, and then in late 2019, just for background purposes, it was acquired by the Thundering Herd, which is a private equity, funds management business based in Melbourne, with members comprising diversified skills and legal investment banking and analytics.
Ewan Laughlin: (05:14)
In terms of the BrickX platform itself, just to round out the corporate structure, it’s a typical managed investment scheme. So there’s a responsible entity, the manager itself, which is BrickX and a custodian in terms of governance from a property security perspective. So that’s the structure, it’s typical of an MIS. BrickX is the manager. Each BrickX trust owns a single property, so they stand alone. There’s no contagion, just to alert members there, each BrickX trust has 10,000 trusts on issue and they can be traded on the platform. As I mentioned, in terms of the MIS structure, there’s a PDS, the financial services guide that’s available to members. So the benefits of the platform itself and what does Brick X facilitate, it empowers investors to invest in fractional or part ownership via beneficial ownership of a property.
Ewan Laughlin: (06:17)
So what are the benefits? The benefits are obviously property sector exposure and choice, without the engagement with tenants, the property management itself, dealing with lenders and all the associated elements of owning property. So we remove that away from investors, and we actually give you that beneficial ownership. The second aspect is diversification, allows you a choice. We own 19 properties across Australia, and I’ll talk about that later, in terms of further discussions. In terms of the high points, obviously have access to distributions. We pay about $22,000 a month to our investors, or just as a guide. The affordability as well, attached on in your opening remarks, we allow our members to acquire Bricks for as little as $30. The highest brick is about $170. So it’s affordability, it’s the entry cost, it’s the ease of the platform. All the information is stored. It’s a frictionless onboarding process, and all the information is contained in that platform, from tax returns to confirmation. So basically it allows you to engage in that property space as a member through the platform. Thank you.
Jennifer Harrison: (07:32)
Lovely. So there are 19 properties and where are they located, which states, and are they in the cities or in the regions?
Ewan Laughlin: (07:40)
Sure. They’re mainly in the capital cities. So Sydney, Melbourne, Adelaide, and Perth. The majority would be in Sydney and Melbourne, obviously being the largest states. And we do have two regional properties based in Ballarat in Victoria.
Jennifer Harrison: (07:56)
Hopefully. And how do you manage their properties, and how have you been finding managing through COVID?
Ewan Laughlin: (08:01)
Sure. It’s a great question. In terms of the property portfolio itself, as I mentioned, there’s diversification with 19 properties across those capital cities and regions. In terms of our rental base itself, clearly our tenants are not part of the short-term rental market, not part of international tourists, so our platform and our investor base is not impacted by those, the disruption, that market. That said, we all are aware that there’s been a spill out from those markets into the traditional investor base. And certainly what we have seen is disruption in the Sydney-based rental market, less so in the small states of South Australia and WA. And I guess it comes down to that old adage in property, it’s all about location, location, location.
Ewan Laughlin: (08:58)
So to give you an example, notwithstanding COVID lockdown 2.0 in Melbourne, we had a recent vacancy in Port Melbourne, which is quite a nice suburb. It’s a medium upper-class type suburb. And we had no difficulty in actually engaging a new tenant in less than two weeks, for the same rental as the previous tenant. So notwithstanding lockdown 2.0 and the disruption in the market, when it comes to location and a quality property, you’re generally fine, you don’t have those issues. In terms of a broader summary perspective for BrickX itself, off the 19 properties, we don’t have any tenants on deferral terms or with COVID payment terms or any other support mechanisms. We have one property that’s currently vacant and we’re working through that arrangement, in Potts Point in Sydney. So hopefully that gives you a summary of what we have seen where the disruption of the markets are and the impact on our portfolio, which is minimal.
Jennifer Harrison: (10:06)
If I want to buy or sell my Bricks on the internal exchange, how would I be guided as to what the valuation of a Brick is? How often do you value the properties and then how is the [inaudible 00:10:22] a price in the internal exchange determined?
Ewan Laughlin: (10:25)
Sure. It’s a good question Jennifer. So firstly, in terms of the valuation process, it’s undertaken by biannually. It’s an independent external valuation process from a governance point of view. The Brick price is then updated to reflect that valuation, as a benchmark for investors or members that would like to trade their Bricks. In terms of the platform itself, it’s perhaps akin to an ASX trading type platform for want of a better word or a guide. So in this case, it’s seller determined pricing. So when buying and selling between members, price is driven by availability of Bricks, and the availability of Bricks and the price is determined by the seller. It’s a very transparent process for our members. There’s an order book where all the sales are listed, top to bottom, so lowest price to highest. And then it’s just a matter of matching process where liquidity is created by the sellers looking to sell and buyers looking to buy, and as there is a match, their membership accounts are matched off, for the buying and the selling process.
Ewan Laughlin: (11:35)
So price discovery is obviously assisted by the valuation. So there is that price discovery, and then it’s the trading mechanism, in terms of demand supply, which is seller determined. As a stock measure, you cannot sell your Bricks for greater than 20% discount to the BrickX valuation. So at all times that’s a good benchmark if you like, or a fail-safe. So that’s a little bit about the selling process. In terms of brick prices itself, it’s as high as $142 in Port Melbourne, because of the small number of investors in that property, to as low as $36 for a property in Ballarat. And 11 properties are trading above the valuation or 60% of the portfolio as a guide. Thank you.
Jennifer Harrison: (12:25)
Okay. Can you tell us a little bit more about your approach to leverage and how does that work? Are all the properties geared or some of them are not?
Ewan Laughlin: (12:34)
Correct. Some of them are not geared Jennifer. It’s very much a conservative stance, so where we do have debt, it’s less than 40% LVR. So we’re able to manage any impact in terms of the economic cycle very well, given that leverage is quite conservative from a residential portfolio perspective. We have the benefit and support of a major bank outside the big four. And more recently we have also engaged and have secured lines with another major lender who are part of the big four, so we think we have sufficient support from two major institutions to execute our growth strategy. But in terms of very simple terms of leverage, it’s not in our interest to gear up the property.
Jennifer Harrison: (13:24)
Okay. And can SMSFs buy Bricks on the platform?
Ewan Laughlin: (13:29)
Great question. SMSFs can buy and do purchase Bricks in the portfolio. For obvious reasons, it’s a long-term asset supported by distributions and cash flows on a longer term basis as well, with hopefully capital returns over that period of time. Call it five to seven years as a platform asset.
Jennifer Harrison: (13:58)
And can you tell us more about what happens? I believe there is a clause in the trust that says, after a property has been owned by five years, the owner of the Bricks get to vote on whether that property should be put up for sale on the general market or whether it should continue to be traded on the platform. Can you tell us a little bit more about that please?
Ewan Laughlin: (14:15)
Sure. That’s correct Jennifer. In terms of exit analysis, five years I think is a steady state for property assets, so hence that five year anniversary. So BrickX actually will hold a meeting for investors in that property itself or in that trust, and members have the ability to vote subject to certain requirements, to put that property for sale. All those details are actually encapsulated in a management document that’s shared with the members. We have had two votes earlier this year, both of them have resulted in the properties remaining on the platform, for various reasons that the members have chosen to do so. So that’s the formal process. That said, members at any time, not unilaterally, but subject to certain voting requirements, can also call a meeting to facilitate a vote in terms of selling the property from the platform. So they have that ability or choice to do so as well.
Jennifer Harrison: (15:23)
And finally, one of the benefits, so I think of the BrickX platform is that people who are trying to save a deposit for buying their first home can save for the deposit inside the asset class that they’re trying to buy, so they can benefit from any increases in the market value in that asset class. Now, you have an AI enabled Smart Invest feature on the platform, can you tell us a little bit more about that please?
Ewan Laughlin: (15:53)
Sure. That’s a great question Jennifer, and let me elaborate a little bit more on the opportunity to invest. So there’s two mechanisms whereby an investor could, or a member could invest in Bricks. The first is build my own, where you have a choice of the 19 properties and you can choose based on your own view on the property market and the sector, whether that’s diversification-led or distribution-led, in terms of what drives your investment thesis as a member. In terms of a savings plan, if you would like exposure to the property market, but you don’t have the million dollars, as you mentioned in your earlier calling point, but we all need to start somewhere and you still like exposure to the asset class. This platform via Smart Invest, allows you to do so from as little as $50, in terms of monthly direct debit deposit.
Ewan Laughlin: (16:49)
So the AI process then works on purchasing Bricks based on a discounted valuation and then a diversification process. So effectively it’s like an ETF with a low cost $50 entry price. And you can actually top up through transfers, if you would like to add further to the Smart Invest strategy, or alternatively, you can also defer for a month or two if you have other other causes to do so. So it’s quite flexible in that regard. And we see a number of our investors partaking in that Smart Invest strategy.
Jennifer Harrison: (17:25)
Perfect. Thank you so much for telling us more about BrickX, Ewan.
Ewan Laughlin: (17:28)
Jennifer Harrison: (17:30)
Daisy, let’s come to you now. And you’re the co-founder of Mortgage Mates, which has been described as like a dating app for people who want to share a mortgage together. Can you tell us a little bit more about how you came to create this and how it works?
Daisy Ashworth: (17:48)
Yeah, thank you Jennifer. You’ve definitely used the tagline that we explain Mortgage Mates to our users as they first come across us. So we call ourselves the Tinder of home ownership, because that’s exactly how the platform works. We’re a platform that matches two or more users to own a home together, using a number of preferences when they’re looking for that particular first home. So it may be looking for a property in the CBD of Melbourne, paying a particular price point, and having a particular amount of the deposit that they have available to them, and we match the other user based on similar preferences to each other. Jess and I… So Jess is my co-founder, came up with Mortgage Mates, because we actually have a background in community development and homelessness, and we’ve seen firsthand the impact that lack of affordable and long-term accommodation can have on an individual, and we wanted to find a unique way to enable people to be able to enter that home ownership market more from a co-living perspective.
Daisy Ashworth: (18:53)
So for Mortgage Mates users, we have the opportunity for either one person to live in the property and one person invest, for both people to live in the property to create that community connection. And it can also be used as an investment portfolio, but we are really looking at it from that perspective of, how do we help people transition out from a very expensive rental markets, when they’re trying to save for a deposit, or they’re trying to move into that first home, but by making it more affordable. And so that’s what Mortgage Mates does.
Jennifer Harrison: (19:25)
Okay, great. Thank you. Can you tell us a little bit more about what kind of preferences can people express and then be matched for?
Daisy Ashworth: (19:33)
Yeah. So our algorithm that we use, it’s a weighted algorithm and it is purely around the housing preferences that those users have. So we’re purely looking at, where they want to live, how much of a deposit that they have to provide, how much they want to spend on a property. So we match people, as I say, that are looking for either a rural property in New South Wales, or an apartment block in Perth CBD. The reason that we base it purely on the housing preferences that we know that we have to be able to enable people to have a really clear first conversation around what they’re looking for, and the house is obviously the facilitator to build that relationship.
Daisy Ashworth: (20:15)
So once we’ve matched you based on your housing preferences, then the ability to form a connection and have a relationship with each other comes from your own interactions. So we’re not trying to predetermine who you would most like to live with. We give you the options of who would like to live in a similar house, and then you’re able to develop that relationship from there, to find the right person or the right mate for you to live with.
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Jennifer Harrison: (21:26)
Okay. And I believe to help manage the risks and rewards from co-owning a home with someone that you’ve only just got to know, and that you’re not in a domestic relationship with, I believe you encourage the mates to enter into a co-ownership agreement. Can you tell us a little bit more please about what is a co-ownership agreement and what kinds of terms might go into one?
Daisy Ashworth: (21:52)
Yeah, so you’re absolutely right Jennifer. We acknowledge that probably buying a house for the stranger is not the way in which most people grew up thinking they would own their first home. But the realisation and the current climate is that being able to afford a property on a single income is very limited. We know that 92% of rentals aspire to own, but only 49% ever feel that they will be able to do so. And so Mortgage Mates has jumped on that sharing culture of, well, how does the relationship with a stranger really work in 2020? And we know that five years ago, had you asked somebody to get into a car with a stranger or indeed go on a date with a stranger, the likelihood is that they wouldn’t have considered that a viable option. And yet most of us pre-COVID have stayed in an Airbnb that’s owned by a stranger, or they have in fact got into an Uber with a stranger.
Daisy Ashworth: (22:43)
So Mortgage Mates uses that same logistical pathway, of matching you with somebody that you don’t currently know. But the way that we say that Mortgage Mates works is that we actually believe it’s safer than buying with somebody that you may know. So the reason for that is co-ownership agreements, and the fact that we really highlight to our mates that they take steps prior to owning with somebody. That mean that they are really safe and secure in the choices that they’re making. So we know if you’re buying with a family member, friend or partner, very often, we do so with our hearts rather than our heads. We want to live with somebody we’ve fallen in love, we think that buying a house is the next step in our relationship, and so we do that without really taking any steps to ensure what happens if this doesn’t work out, what happens if the relationship goes wrong?
Daisy Ashworth: (23:32)
Whereas when you’re buying with a stranger, you’re absolutely going to feel comfortable in saying, “I would like to see your financial background. I would like to have a police check from you. And I absolutely require a co-ownership agreement to be in place.” And that means that you’re preventing some of those issues that may arise when you live with any person, before they’ve actually occurred. So the co-ownership agreement is a legal contract that defines for you and your mates some of the processes that you would like to go through, if certain steps occur. The co-ownership agreements that we link our mates into, so to be clear, we don’t provide legal advice, we don’t provide financial advice and we’re not real estates. We’re purely the connector, we’re the Tinder part, and then the relationship, you have post mortgage mates is up to you.
Daisy Ashworth: (24:19)
We have links on our what’s next page, to a number of providers that provide co-ownership agreements. And each of those are slightly different, depending on the price point that you’re looking to make, how much of an interaction you would like to have with a lawyer, whether it’s pre-filled or whether you’re actually going to work with somebody, perhaps that you already know, if you have a lawyer that you’ve worked with previously as well. So the co-ownership steps that can be included would be exit strategies. So how long do you anticipate buying or owning your first home with your mate? Do you see this as a long term home ownership goal, whereby you may live with the person for a couple of years and then use the equity to buy your own home independently? Is it an option that you may look to have an exit strategy, to sell in three to five years? Are there insurances in place that you require from both mates?
Daisy Ashworth: (25:09)
So perhaps income protection. So if one of you is unfortunately impacted by a crisis such as COVID, you know that there are mechanisms in there to ensure that the safety of the mortgages is paramount. But really the co-ownership agreement can include whatever is required by you and your mates. And so again, what we advise our mates to do is have really clear conversations at the outset. What’s important to them? Why are they buying this home? How do they want it to be successful? And then they draught a co-ownership agreement that defines all of their requirements for their home ownership journey.
Jennifer Harrison: (25:44)
Okay. So we’ve had a question come up in the chat. For example, could the co-ownership agreement say what should happen if one mate wants to sell, but the other mate doesn’t want to sell?
Daisy Ashworth: (25:57)
Absolutely. So they’re exactly the kinds of clauses that you would include in your co-ownership agreement. You may decide to have a first refusal, so if one mate decides, “Look, I really need to sell my part of the property.” What would be the steps that would be taken to enable that mate to be able to buy that property first? Or it may be a requirement that you find another mate from the platform, so you’re actually still part owning with somebody else, or it may be that you say within the co-ownership agreement, unless there are real financial reasons why you have to sell, you’re unable to do so until that first exit point. So that may be year one, year three, whichever works best for you.
Jennifer Harrison: (26:38)
It sounds very similar to a shareholders’ agreement, which is quite a common feature in small private companies. How easy is it to get a loan as a co-owner and how do those things that go around the purchase work, like conveyances and lawyers?
Daisy Ashworth: (26:58)
So again, to be really clear, we don’t provide mortgages or legal advice, so we would absolutely refer our mates through to providers that do exactly that. But I guess to be really clear, co-ownership, isn’t a new concept. So the way in which Mortgage Mates is working, which is matching you with somebody else to buy a home, that’s the unique part of this process. But co-ownership in general, is probably one of the most traditional ways of owning a home that has existed for home ownership periods. So normally you would buy with a partner or potentially a family member or friend, and these mortgage products already exist to facilitate those ownership pathways. So buying with somebody that you’ve matched with on Mortgage Mates and then become friends with, and then decide to own a home with, are no different to those traditional forms of ownership.
Daisy Ashworth: (27:47)
So from a mortgage perspective, obviously you’re still required to meet the traditional requirements, so being able to obtain funding. So that would include having the right credit scores. It would include being able to demonstrate your ability to repay. But the part around it being with a stranger actually doesn’t impact the ability to access finance at all. And we have a number of brokers and mortgage providers who are actively working with us in this space, because they acknowledge that there’s so many people that without this ability to buy with somebody else would be priced out of the market. So for our users, the choice of who they obtain a mortgage with is absolutely down to them. Again, on our what’s next page, there are a number of providers that you can link in with. But actually you can choose to obtain a mortgage from whoever best works for you. And all the feedback that we’ve had from providers has been extremely positive. So we’ve seen no reason as to why there would be any additional challenges for somebody to access funding at all.
Jennifer Harrison: (28:52)
Excellent. And what kind of feedback have you had from people who’ve used the services to the difference it’s made to them?
Daisy Ashworth: (29:01)
So we’ve been really lucky that the feedback we have for Mortgage Mates has been overwhelmingly positive. When we launched the product back in 2019, whilst we’ve done market research to say, we believe this is a product that’s needed in the market, we feel it’s something that people are interested in learning more about. We really didn’t know how that would transition through to active users and active participants on the website. But luckily for us, Mortgage Mates is growing month on month with unique users coming to the website, joining as mates, and matching and starting that co-ownership pathway. COVID has definitely had an impact on Mortgage Mates, both in a positive and negative sense. Negatively in the sense that currently it’s much more challenging to buy a home, depending on where you’re located, the ability to meet with your mate even has been severely restricted in Melbourne for example.
Daisy Ashworth: (29:57)
But the positive side being that, I think if you’d have asked most of us back in December 2019, whether working from home was either A, feasible, or B, something that you would want to do, the answer probably would have been no. And yet, as we come towards the end of 2020, working from home has actually become the new norm, and Mortgage Mates is of a similar variety to that. So would we have looked at buying a home with a stranger previously? Absolutely not. Does it seem more normal to do so now? Absolutely. And I think for us and our mates and the feedback that we’ve had is that this is an option for people that otherwise would never have been able to enter the market. They’re in a cycle of paying high rents in CBD locations, they’re saving for a deposit, but by the time they’ve reached the level of that deposit to buy a home, the cost of housing has already increased. We know that two of the most expensive cities in the world are based right here in Australia, and that we’re actually more expensive to buy a home than Manhattan.
Daisy Ashworth: (30:59)
So it’s more feasible for our mates to be able to buy an apartment in New York than it is to buy a house in Bondi. And so Mortgage Mates really impacts that demographic and that cohort of potential buyers. For us, we know that stable housing, if we’re not successful in locating that early in life will have significant ongoing impacts for individuals. And this is the feedback that mates are giving us, which is, “I really couldn’t see a way in which I would be able to buy a house before retirement.” And yet we know if you don’t own a home by retirement, then you are likely to be significantly financially impacted. So we’ve been really lucky that the feedback has been overwhelmingly strong.
Jennifer Harrison: (31:40)
Is I think also even though your target market is probably younger people, and Darren, about to come on to you in a minute. I think we also do know that there are people in the later stages of life, find that the affordability problem hits them very hard as well. Daisy, just before I leave you, there’s a question, come up on the chat. Is there a way to combine maybe someone’s desire to be an investor and have a really good stable tenant? Can we kind of combine the co-ownership model where one of the co-owners lives in the property and the other co-owner is just an investor?
Daisy Ashworth: (32:18)
Absolutely. So that’s a very traditional way of co-owning in other countries like the United Kingdom, is that you have an investor that owns a percentage of the property, and then you have another co-owner that also owns a percentage of the property but actually lives in the accommodation. And then again, the decision between how that relationship works between those two mates will be dependent on their requirements, but it may be the mate that lives in the property would pay an additional rent to the investor, and that way the investor knows that the likelihood of them having a stable tenant is much more significant, because that tenant actually owns part of the property as well.
Daisy Ashworth: (32:57)
And whilst we talk about ownership being traditionally 50/50, it can be a variety of ownerships. So somebody could put 30% into the property and own that 30% as an investment, and then 70% could be owned by the person that lives in the property or vice versa. So if somebody is really hoping to enter the market and you have an investor that’s socially motivated to support somebody to do so, then they can manage that percentile amount for both of their needs.
Jennifer Harrison: (33:27)
Perfect. Thank you so much Daisy for telling us about Mortgage Mates.
Daisy Ashworth: (33:31)
Jennifer Harrison: (33:31)
Darren, now you’re the CEO and founder of Bricklet, I believe you launched into the market like Mortgage Mates, so late last year, 2019. Can you tell us a little bit more about Bricklet? How does it work?
Darren Younger: (33:45)
Yeah, sure. Thanks Jennifer. I think hearing the other guys talk about what their businesses do and then Bricklet is a little bit different, in that we provide a platform that enables people to co-own property effectively buy pieces of property that are all on title. So the easiest way to understand that I guess, is to give a simple example. So I took a $500,000 property, let’s call it a $500,000 apartment and split that up into 20 bricklets, say those pieces would be 5% ownership each. And so the people that are in those bricklets, effectively they’re on title, and they also have the value of the income or any income that’s generated from that property. So no different to owning the full property, just in a smaller piece.
Jennifer Harrison: (34:34)
And does it have to be 20 bricklets? And also how do I find the property and the co-owners? Is that also where Bricklet comes in to help?
Darren Younger: (34:45)
Yeah. Good question. I mean, Bricklet doesn’t go out there and source properties. What we do is we provide the platform. So we have the vendors, are typically property developers that are offering the properties for sale and then the Bricklet owners or people that are looking to purchase smaller pieces of investment property. And so in a way it’s kind of like, it is a matchmaking kind of service where you want to buy a smaller piece of property, you find the properties that are actually available. Also, we’re finding that developers and vendors are also using the platform when there’s multiple people that want to buy it together, they can use the platform as well. Because ultimately what it provides is a term that we call independent part ownership. So all the people that are on title, they’re all part owners, but what the platform provides them is that independence. So it means that anybody can sell their part at any time.
Jennifer Harrison: (35:39)
And who lives in the property and who manages the property?
Darren Younger: (35:42)
I mean, most of the property is investment properties, so there will always be a tenant that lives in the property and managed by a property manager. So each property has a property manager assigned and often it’s already press on when it comes onto the platform. So the property managers they are all authorised to use the platform, they provide the service to tenants and look after the property on the behalf of the landlords, it’s just in this case there’s multiple landlords, not just one, and all the reporting and all the information is provided back through the platform.
Jennifer Harrison: (36:19)
Now, I believe there are some really interesting use cases for your IP and tech in helping people who might be experiencing mortgage stress, and they don’t want to have to sell their house, they could potentially fractionate the ownership and sell off some bricklets. Is that correct?
Darren Younger: (36:36)
Yeah, absolutely. In the way that that would work is like, let’s say I own a property, let’s say it’s worth a million dollars in the mortgage, let’s say I’ve got $600,000 left to pay, that’s how the mortgage is, but I want to sell off a 20%, so let’s say $200,000. So Bricklet enables you to be able to do that through the platform and be able to sell off that in a way that investors are buying in and buying those bricklets. The funding obviously is separate to that, because we’re not proving any kind of funding. However, we have funding partners that look at those kind of scenarios and help those people deliver on that.
Jennifer Harrison: (37:14)
Perfect. And potentially I could say there might almost even be a collaboration here between Mortgage Mates and Bricklet. Could that work? [crosstalk 00:37:25]-
Darren Younger: (37:26)
Yeah, I mean, I have spoke to Daisy about it a few times.
Jennifer Harrison: (37:26)
Oh, yeah, Daisy, on our now webinar?
Darren Younger: (37:32)
We have had a few conversations about that, because they are very much aligned. One is about finding people that want to live together and provide the finance in a way, and Bricklet is a way to provide a dependent part ownership. So they are very closely aligned. And who knows, sometimes we might get a bit more closely aligned.
Jennifer Harrison: (37:50)
Wonderful. And Darren, just something about the technicalities, so you’re saying if you’re working very closely with developers, would they potentially already have some introductions to be made to lenders who have an appetite for lending against this kind of title?
Darren Younger: (38:06)
Yeah. We work with a number of lenders, there’s a group of brokers as well that are working with us around providing finance for people that want to buy bricklets. So there’s definitely opportunities out there for people that want to borrow to buy bricklets, and we’re looking at some very innovative ways for those finance partners to offer new products in the market to enable that to happen. I think ultimately what we’re trying to achieve there is, enabling people to buy into the property market, get their foot on the ladder, so to speak, and then get started. So there’s a lot of innovative products that are becoming credible work side by side with Bricklet in the near future.
Jennifer Harrison: (38:53)
And we heard Daisy talk about the co-ownership agreement. Do you have something else between the owners of the bricklets to ensure that everyone has to contribute towards the rights and insurance and the repairs?
Darren Younger: (39:09)
With the rights and the… So with all the expenses, how basically it works, Bricklet model is, there’s multiple owners. So the property manager almost acts like an asset manager, and so with the property manager, so we use… I mean, a good example of one of our partners in the property management side is Yabonza. So the guys at Yabonza, who do the management for a property, they look after all those expenses as well. So if you think about running through a month, they would look after all the payments throughout the month, and then when the rent comes in, those payments are paid back and then any of the net rent is then distributed to the bricklet owners.
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Jennifer Harrison: (40:14)
Okay. And if I own a bricklet, if I want to sell it, how can I sell it? But also if I don’t want to sell it, if I want to hold onto it for the long-term, is there anything that’s going to kick in to prevent me from holding it for the longterm?
Darren Younger: (40:30)
Yeah. Good question around the longterm. I mean, Bricklet is just the platform that enables that independent co-ownership. So there’s no exit strategy for the properties that come onto the platform. So we’re not acting in that way. So once you own a bricklet, you can in fact own it forever. So you don’t have to worry about an end point in time, and then to be able to sell your bricklet is a matter of just getting onto the platform, putting it up for sale and putting a price on it, and then letting the market know about your bricklet is for sale.
Jennifer Harrison: (41:04)
Okay. And would the property have been professionally valued to help the market understand where the price should be put on the bricklet?
Darren Younger: (41:13)
Yeah. So any of the bricklet owners can offer to get a valuation at any time. We’re not enforcing any kind of valuation rules, but if anybody wants to do a valuation, it’s kind of like in the same way that I guess you have shares on the stock market or a certain price, but then you have companies that value those and say it’s probably underpriced or overpriced. And it’s the same with property, I guess, is that valuations can provide that guidance, but ultimately at the end of the day, it’s the market that makes a decision over what price they’re prepared to pay for the bricklet.
Jennifer Harrison: (41:51)
Perfect. And I’d like to ask each of the panels now to talk a little bit about their founders journey and bootstrapping or raising capital. So Darren, maybe you actually, we’ll go in reverse order to come back here, Darren. Can you tell us just a little bit about your founders journey and how… I believe you’re partnering with a couple of property companies or they’ve actually invested in Bricklet. But also you’re about to launch a crowdfund to raise growth capital.
Darren Younger: (42:23)
Yeah, that’s right. So I guess on the investment side we’re very fortunate to be working with Mirvac and Stockland, [inaudible 00:42:31], they’ve both come on board as investors in Bricklet. So it’s great to have market credibility with those guys. And at the moment we are doing a capital raise and we are doing a crowdfund at the moment, which is about to launch on the Equitise platform. The reason for that is, we believe that those that they’d like to invest smaller pieces of companies might have the appetite to invest in smaller pieces of property as well. So there’s a good alignment around that. So we’re really excited to be offering that out to that audience as well.
Jennifer Harrison: (43:06)
Okay. And how does Bricklet make money?
Darren Younger: (43:10)
Most of our revenue stream comes from the vendor. So we charge the vendor a fee when a property is first listed on the platform. There are small fees paid by the bricklet owners, that they’ll pay a percentage fee when they purchase, which includes the stamp duty, because you’re directly on title, we also need to pay stamp duty as part of the purchase. And then there’s a small fee when you sell as well, and that’s to cover the conveyance. So remember that this is purely a property transaction, so there’s conveyance fees as well, as part of any buyer sort of process.
Jennifer Harrison: (43:43)
Awesome. Thanks so much for telling us about Bricklet, Darren. Daisy, let me come back to you, because they believe you and your co-founder Jess, you’ve bootstrapped your venture so far. But I also believe you’ve had the opportunity to participate in some accelerator and incubator and found a mentoring programmes like Pitch@Palace.
Daisy Ashworth: (44:04)
Yes, that’s right Jennifer. So Jess and I met around three years ago, working in the not-for-profit space, and as all good ideas do, we came up with Mortgage Mates over a pint at the local pub. And from there we’ve actually worked to develop Mortgage Mates into the platform that it is today. We actually launched version 2.0 last Sunday, and we’ve done all of that as a bootstrap startup. And approximately two years ago, Jess moved back to Melbourne, so we’ve actually been working on Mortgage Mates across the country and working to develop the platform to be as successful as it can be, in its current format. So whilst we’ve been part of some accelerator programmes, we haven’t done any fund raising to date. So we’re continuing to work as a bootstrap startup at the moment. But as you touched on, we have been very lucky to be part of a number of accelerator programmes and pitching events.
Daisy Ashworth: (45:00)
So we’ve been really welcomed into the startup community, particularly in Perth, which is a really diverse and developing portfolio of startups, not just in the tech space, but in tech in general. Some highlights for us, I recently completed the SBE3 female founders programme, which was a fantastic eight week opportunity to really dive into what the platform does, how proptech works and how we can develop it to be sustainable moving forward. And last year I was part of the Pitch@Palace event. So actually flew over to Adelaide, spent 24 hours in Adelaide, pitched Mortgage Mates, and was successful to be in the final based here in Perth last November.
Jennifer Harrison: (45:46)
How fantastic. And how does Mortgage Mates make money?
Daisy Ashworth: (45:51)
We have three potential revenue streams. The first is advertising, so looking at providing tailored responses in adverts to the information I use as a requiring. So if they’re looking for a particular property type in a particular location, facilitating some of that opportunity. We will be considering a subscription service in the future. Our current model is to not implement that at this stage, the reason being that we don’t want to add an additional barrier to market. So we want people to be able to come, see Mortgage Mates as a platform, sign up and do all of that, without a charge in place. So our primary revenue stream is actually a referral fee model. So with the providers that we have relationships with, we actually have a referral fee opportunities in place. So whether it be a set fee per referral, or whether it be a percentile of the overall sale of the property, for example, we actually receive a return on that transition from Mortgage Mates through to that particular platform.
Jennifer Harrison: (46:53)
Perfect. Thanks so much Daisy for telling us about Mortgage Mates. And Ewan, could you tell us a little bit please, about how BrickX makes money. And also Thundering Herd is a professional venture capital and private equity firm, are you able to tell us a little bit about the investment thesis you had when investing into the ownership of BrickX?
Ewan Laughlin: (47:18)
Sure. In terms of, a response to how do we make money, the business model is related primarily to a trading fee. So buying and selling of Bricks results in a percentage fee that the members pay. So that’s primarily the business model at this stage. In terms of how do we raise money, just for everyone’s background in 2016 when BrickX was founded, actually had the backing of a high net worth family, as well as the venture arms or innovation arms of two major banks in the country. So that’s the starting process for BrickX. And since Thundering Herd’s engagement and acquisition late last year, Thundering Herd itself has the benefit of a wholesale funding model, so high net worth investors, as well as family offices. And that’s primarily the fundraising model.
Jennifer Harrison: (48:30)
Perfect. Thank you so much Ewan. Well, I think we’re coming close to time and we don’t have any questions. I might just give it a little bit… If anyone would like to ask a question into the online facility, now is your opportunity, because it’s probably about time for me to wrap up and to thank you very much Ewan Laughlin from BrickX, Daisy Ashworth from Mortgage Mates, and Darren Younger from Bricklet. My thanks also to Stone & Chalk for being a foundation supporter of the Proptech Association Australia and for their events team, amazing support of us in hosting our monthly webinars.
Jennifer Harrison: (49:13)
This is a monthly event, so there will be another one in October and another one in November. The best way for you to stay in touch is to follow on the LinkedIn page and also to subscribe for the newsletter from the website. I’d like also to thank Kylie Davis, Marie-Anne Lampotang, Kylie Dylan, AJ Chand, and Simon Hayes, who are volunteering with me as the committee members of the Proptech Association Australia. Thank you very much for joining us. There will be a recording link made available, and we look forward to seeing you on the next Proptech Association, learn at lunch webinar. Thank you very much.